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Estonia: Small Country Faces Big Problem In Population Decline (Part 1)

  • Breffni O'Rourke

The population of Eastern Europe and Russia is aging due to a precipitous drop in the fertility rate and, in many of these countries, to an increase in average life expectancy. This demographic revolution will have wide-ranging consequences. Family relations, the economy, the social security system, and eventually the ethnic composition and homogeneity of the population will be affected as governments try to cope with the challenges generated by these changes.

To maintain current population levels, a woman must have 2.1 children during her lifetime. In many countries the fertility rate is significantly below the replacement level. It was 1.3 in 2000 in Romania and Estonia, 1.13 in the Czech Republic in 1999. As a consequence the population of Estonia, Latvia, and some other countries has peaked and begun to fall. Some demographers believe that the number of Russians has peaked and that there will never be as many Russians on this planet as there were several years ago.

The causes for the decline in fertility are varied. Some families have opted to limit the number of their offspring because of the fall in living standards caused by the transition to a market system. For others, an improved lifestyle and rising expectations have played the decisive role. Although a return to higher rates of fertility is expected, they should remain below the replacement level. A relative paucity of young people will be the norm rather than the exception for the foreseeable future.

The decline in fertility has been accompanied by an increase in average life expectancy. The increase has not been universal, for in countries such as Russia, life expectancy, especially for males, has fallen significantly. A shorter lifespan is a tragedy, but longer life is not an unqualified bounty for transition states. The cost of expanded health care and pension payments places a heavy burden on already over-extended economies. In Estonia, for example, the ratio between pensioners and workers is 1:1.5, significantly below the 1:2.5 ratio that some economists consider the minimum needed to sustain economic growth.

Various strategies have been adopted to mitigate some of the effects, including the increase of various benefits to children or their parents In the Czech Republic the suggestion has been made to set aside about 50,000 crowns ($1,300) for each newborn child, who would then collect the sum plus interest at the age of 18. Romania is increasing the size of its monthly child allowance. Even greater emphasis has been placed on social security reforms and the encouragement of immigration. Many countries are working on plans to make mandatory contributions to individual pension funds that the contributor would choose himself, and increase the size of employee contributions to state pension systems. But the more ambitious plans to increase child benefits or revamp the social security system seem to be beyond the financial capabilities of all but the most successful transition states.

Increased immigration to augment the labor force is another option under study. But most migrants would probably come from developing countries, and their integration into local society would be fraught with difficulties. In short, there are no easy solutions, and the demographic crisis may be one of the most difficult challenges that Eastern European countries must face.

In this five-part series, RFE/RL correspondents will take a look at the demographic situation in the Czech Republic, Estonia, Romania, and Russia -- as well as Albania, where the birth rate remains high -- and the efforts of their governments to address some of the problems that have arisen. The series begins with a look at the Baltic nation of Estonia.


In the developed world, birth rates are falling. In many European countries populations have peaked and are already starting to decline, leading to labor shortages. And governments are worried that there will be too few young workers to support the pension payments for the growing number of old people. The Baltic state of Estonia has one of the world's lowest birth rates. RFE/RL correspondent Breffni O'Rourke looks at the dilemma facing that small but economically dynamic nation.

Prague, 19 October 2001 (RFE/RL) -- Estonia is one of the success stories of transition. Since regaining independence from the Soviet Union, it has pursued a vigorous reform course, and has enjoyed strong economic growth. It has also become a favorite for first-wave entry into the European Union, in the next few years.

But the country's progress is being threatened from an unexpected quarter: namely the plummeting birth rate. As things stand now, so few Estonians are being born that the present population level cannot be maintained. In fact, some people worry that given another century, there won't be any Estonians left at all!

More immediately, the question arises of how the economy can continue expanding at a time when fewer workers are entering the marketplace. And how can the declining work force support an ever-growing number of retirees.

Independent economist Heido Vitsur sets out the problem: "In the United States there are 3.4 workers for every retired person. In Estonia there are 1.5 workers per one retired person. And if we [continue to] have a birthrate as low as we do now, there will [eventually] be less than one worker per retired person, and this impact will be damaging for the Estonian economy -- we cannot survive."

Vitsur, who is based in Tallinn, says that Estonia's birthrate is 40 percent below the level needed to stabilize the population.

Why is this happening? Demographers point out that there are two broad conditions which can produce falling birth rates in the more developed world: an increase in poverty, and -- ironically -- an increase in prosperity. In other words, when people face a decline in living standards, they tend to have fewer children. Conversely, when living standards increase, they also have fewer children, preferring to establish themselves financially first, or to spend resources on things like cars and holidays.

In Estonia, both factors are probably relevant, in that divisions in income have widened under the market reforms: some people have prospered, some have not. Vilja Kuzmin, a top specialist with the Estonian Social Affairs Ministry, says the child-bearing rate of Estonian women has in any case traditionally been moderate -- in line with the "European model," as she puts it -- but that in the new era it has fallen further. For instance, in 1970 there were 15.85 live births per 1,000 citizens, A similar birthrate persisted until the end of the 1980s. Then in the early 1990s the birthrate began to plummet, reaching 8.70 by the end of the decade. Demographers believe that the rate has now stabilized at about 9. Estonian women now have 1.3 children on the average.

Kuzmin says: "It has gone down because the first childbirth begins at a later age than before. People first want to be economically secured, they look for a professional career, they study longer. So we see the first child later. Some years ago it was normal to see the first childbirth at the age [for the mother] of 18 or 19; now it's 25 to 26."

Demographer Juergen Fluethmann, a member of the Berlin-based German Demographic Society, says rapid change in economic factors is a key influence: "Estonia, and all the other [Baltic] countries, have the highest economic growth rates among many European countries. That means the economic development of these countries is racing forward, more quickly than elsewhere, and economic development has always an influence on population development. There is always a close link between economics and demographic developments. The more the social product grows, the higher the lifespan, and the more [women's] fertility declines. This is a connection to be seen practically everywhere in the world."

Fluethmann goes on to say that the decline in the birthrate in the Baltics has been particularly sharp, and he relates this to the sudden political and economic changes in the region.

In the early 1990s in eastern Germany, the birthrate also dropped alarmingly, reaching 5.1 in 1993. But then the fertility rate per woman recovered somewhat -- and now appears to have stabilized in united Germany at over nine. Fluethmann sees the same thing happening in the Baltics.

"I believe that in the countries of Estonia, Latvia, and Lithuania, we will see a consolidation [of the birthrate] taking place. I believe strongly that in those places, like in eastern Germany, we will see an increase [in the rate] in future, but at the same time, I doubt that it would reach previous levels."

So then, that still leaves fewer people to operate economies -- like Estonia's -- that may be expanding. Many observers, Fluethmann included, believe that continued automation could provide at least a partial solution. In the last generation, for example, millions of assembly line jobs were eliminated by the use of robots.

However, economist Vitsur sees robots and other machinery as offering no solution for Estonia: "I don't think so, because Estonia is not so much an industrial country, but a country of services, and increasing our productivity in services [through automation] could not be so great as in industry."

Other possible solutions are government incentives for young families to have more children. Parliamentary deputy Mart Nutt of the Pro-Patria Union, a member of the governing coalition, notes the present Estonian government is moving on the issue of incentives: "Our government already decided to increase [financial] benefits to families with more than two children, and I think this is a very positive and important step."

But government financial incentives, however generous, cannot by themselves provide the answer. There remains immigration. That's a delicate theme in practically every European country, where social tensions can rise if the host community feels threatened by too great an influx of foreigners. Already about one-third of Estonia's population is ethnic Russian.

However, economist Vitsur sees immigration as the "only solution" and demographer Fluethmann also calls it inevitable. Deputy Nutt is also in favor of immigration, and he says that the falling birthrate generally in Europe -- including Russia -- means that most immigrants would probably come from the developing world. He acknowledges the risk of social tension, but says work must be done to prepare Estonians for the situation.

"Estonia must be open for all possible immigrants, if they want to work here, if they want to integrate into Estonian society. I cannot say that we can expect only to be open for one ethnic group, but not for other, different ones."

Kuzmin of the Social Security Ministry, however, says her ministry is not relying on immigration as a means of keeping the country's pension system afloat. She says the ministry is planning for a worst-case scenario of a worker-to-retiree ratio of 1.4:1 until the year 2040.

She says her country is working on an updated social security system, under which young people now arriving in the labor market will partly finance their own future pensions. Workers now also have the option of further coverage though voluntary insurance. In this way, she says, Estonia hopes to meet its social security obligations to the coming generation.